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    Working Capital

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    Anna Pamela Mariano
    Working capital management aims to balance profitability and risk through managing operating cycle and cash conversion cycle. The objective is to optimize how much funds are tied up in working capital. A company must decide how aggressively to invest in working capital through policies around cash management, accounts receivable management, and inventory management. It must also determine how to finance working capital needs through conservative or aggressive approaches and whether to match cash flows through hedging.

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    Working Capital

    Uploaded by

    Anna Pamela Mariano
    4 views1 page
    Working capital management aims to balance profitability and risk through managing operating cycle and cash conversion cycle. The objective is to optimize how much funds are tied up in working capital. A company must decide how aggressively to invest in working capital through policies around cash management, accounts receivable management, and inventory management. It must also determine how to finance working capital needs through conservative or aggressive approaches and whether to match cash flows through hedging.

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    WORKING CAPITAL

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    Working capital management aims to balance profitability and risk through managing operating cycle and cash conversion cycle. The objective is to optimize how much funds are tied up in working capital. A company must decide how aggressively to invest in working capital through policies around cash management, accounts receivable management, and inventory management. It must also determine how to finance working capital needs through conservative or aggressive approaches and whether to match cash flows through hedging.

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    4 views1 page

    Working Capital

    Uploaded by

    Anna Pamela Mariano
    Working capital management aims to balance profitability and risk through managing operating cycle and cash conversion cycle. The objective is to optimize how much funds are tied up in working capital. A company must decide how aggressively to invest in working capital through policies around cash management, accounts receivable management, and inventory management. It must also determine how to finance working capital needs through conservative or aggressive approaches and whether to match cash flows through hedging.

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    WORKING CAPITAL MANAGEMENT

    OBJECTIVE To achieve BALANCE between Profitability & Risk


    (RISK & RETURN Trade-off) (DEFAULT RISK)
    RISK ; RETURN LIQUIDITY ; PROFITABLITY

    OC & CCC
    OC CCC CCC = OC - days AP
    Objective:
    BASUC CONCEPT The funds are tied-up in WC
    Puchase of Sale of Collection Payment of Collection (Basis "HOW MUCH TO INVEST?")
    inventory Inventory of sale purchase of Sale

    days inv days AR days AP

    WC POLICY WC Investment Policy


    ("where to invest?")
    CASH & MS MNGT ConServative vs. Aggressive
    AR MNGT 1) Profitability  
    INV MNGT 2) Liquidity  
    3) Investment CA NCA
    4) A.K.A. Relaxed Strict

    WC Financing Policy Hedging (Maturity Matching)


    ("How to Finance?") Consevative
    Aggressive
    MM C A
    STF
    STF
    CA TEMPORARY
    STF
    LTF
    PERMANENT STF
    LTF LTF
    NCA PERMANENT LTF

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